COGS for Membership Fees

[BritAbroad]

I am working with a new sports club and I have a question about treatment of Cost of Goods sold as part of the membership fees.

The club has an annual membership which is paid up front. I believe I will need to recognize the revenue on this each month in equal twelfth.

However as part of the membership the club has some costs on a per member basis which I am not sure how to treat.

One of these is a sports kit provided to all members, which is the vast majority of the direct cost of each membership. This is provided upon joining and also a new one is provided when members renew each year.

How do I treat this? As COGS? If so, is the expense recorded in full once the kit is provided? This would make each membership at a loss for a short while until the revenue has caught up.

Or is the cost matched in equal 12ths along with the revenue?

Any help and guidance would be appreciated.

 

[Fidget]

I think the first thing is that clubs and associations don't have a COGS sold because their primary activity is not for selling anything. Instead they have an income & expenditure statement. So membership fees will form part of income and purchase of kits will be an expense.

Obviously if the club has other secondary activities such as a shop, bar/cafe, then profits/losses from those will need their own little trading accounts to work out the profit/loss on them, which is then brought into the main income/expenditure statement.

The kits would be expensed in the month that you buy them, so yes, you could potentially be running a deficit earlier in the year if membership fees are the only source of income.